×

BREAKING NEWS FROM CNBC’S KATE KELLY: DELTA REFINERY STRATEGY REVEALED

WHEN: Today, Wednesday, April 11, 2012

WHERE: CNBC’s “Fast Money Halftime Report

Following is the unofficial transcript of breaking news from CNBC’s Kate Kelly. All references must be sourced to CNBC.

Following is a link to Kelly’s story on CNBC.com: http://www.cnbc.com/id/47017435

SCOTT WAPNER: DELTA IS STILL IN TALKS WITH CONOCOPHILLIPS ABOUT A POTENTIAL PURCHASE OF ITS PENNSYLVANIA REFINERY. BUT THE AIRLINE TITAN HAS TAKEN SOME NEW STEPS TO HEDGE THE RISKY PLAY. CNBC’S KATE KELLY HAS BEEN FOLLOWING THE STORY, JOINS US NOW WITH SOME BREAKING NEWS. AND THIS IS A REALLY INTERESTING PIECE OF BREAKING NEWS.

KATE KELLY: I THINK SO TOO, SCOTT. AND LAST WEEK WHEN WE BROKE THIS STORY IT WAS APRIL 4TH, IT ATTRACTED A LOT OF HATERS ON DELTA STOCK. INCLUDING ON THIS VERY SHOW.

WAPNER: YEAH, THE TRADERS WERE ALL OVER IT.

KELLY: THE TRADERS SAID THIS IS A TERRIBLE IDEA, WE DON’T LIKE AIRLINES GETTING INTO THE REFINING BUSINESS. SO HERE’S THE DEAL. DELTA MAY ACTUALLY BE CRAZY LIKE A FOX. THEY HAVE GOTTEN JPMORGAN TO TAKE THE VAST MAJORITY OF THE BALANCE SHEET RISK ON THIS DEAL IF IT COMES TO PASS. HERE IS HOW IT WOULD WORK. DELTA WOULD BUY THIS TRAINER FACILITY FOR SOMEWHERE IN THE NEIGHBORHOOD OF ONE TO TWO HUNDRED MILLION DOLLARS. JPMORGAN WOULD THEN DO WHAT WE CALL FINANCING THE INVENTORY. ESSENTIALLY, THEY WOULD LITERALLY BUY CRUDE OIL FROM NIGERIA OR ANOTHER SOURCE, SHIP IT TO THE U.S., FINANCE THE REFINING PROCESS. THE JET FUEL THAT RESULTED WOULD BE SOLD BACK TO DELTA AT EFFECTIVELY FULL SALE PRICES AND THE OTHER PRODUCTS THAT COME OUT OF THIS PARTICULAR PLANT WHICH INCLUDE KEROSENE, DIESEL AND A FEW OTHER THINGS, COULD BE SOLD BY JPMORGAN ON THE OPEN MARKET. HOPEFULLY FOR THEM AT A PROFIT. BUT DELTA IS SORT OF HEDGED ON THIS ONE BECAUSE THEY DON’T HAVE TO ACTUALLY BANKROLL THESE PROCESSES. NOW THERE IS ONE OTHER INTERESTING ELEMENT WHICH IS DELTA HAS DONE SOME DEALS WITH AT LEAST TWO MAJOR OIL COMPANIES WHO WOULD ESSENTIALLY SWAP THEM ADDITIONAL JET FUEL IN EXCHANGE FOR SOME OF THE DIESEL AND OTHER THINGS COMING OUT OF TRAINER THAT JPMORGAN IS NOT SELLING.

About CNBC:

With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, CNBC World and CNBC HD+, CNBC is the recognized world leader in business news providing real-time data, analysis and information to more than 390 million homes worldwide. The network's 16 live hours a day of business programming in North America (weekdays from 4:00 a.m.- 8:00 p.m.) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide. CNBC.com and CNBC Mobile Web (mobile.cnbc.com) offer real-time stock quotes, charts, analysis and on-demand video.

Members of the media can receive more information about CNBC and its programming on the NBC Universal Media Village Web site at http://www.nbcumv.com/mediavillage/networks/cnbc/